Red Hat restates results
It's all about subscriptions
Red Hat is changing the way it accounts for revenue from software subscriptions. The Linux specialist's new accountants, PricewaterhouseCoopers, objected to the way it counted subscriptions on a monthly basis. From now on it will recognise such revenue on a daily basis. And it will restate its accounts for the financial year ended 29 February 2004, 28 February 2003 and for 28 February 2002.
There will be no impact on revenues for this year, apart presumably from a larger than expected bill from the beancounters. But it will hit quarterly profit and net income. The overall effect of the changes will be to move part of the revenue earned from sales from the first month of the subscription to the last month of the subscription.
Before making the changes, Red Hat accounted for one twelfth of an annual subscription in the month the sale was made. This meant that even if software was sold mid-way through the month the company was still claiming a full month's income. ®